Correlation Between Universal Health and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Universal Health and Premier Foods at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Universal Health and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Health Services and Premier Foods PLC, you can compare the effects of market volatilities on Universal Health and Premier Foods and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Universal Health with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Health and Premier Foods.
Diversification Opportunities for Universal Health and Premier Foods
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and Premier is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Universal Health Services and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC and Universal Health is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Universal Health Services are associated (or correlated) with Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Universal Health i.e., Universal Health and Premier Foods go up and down completely randomly.
Pair Corralation between Universal Health and Premier Foods
Assuming the 90 days trading horizon Universal Health is expected to generate 1.39 times less return on investment than Premier Foods. In addition to that, Universal Health is 1.33 times more volatile than Premier Foods PLC. It trades about 0.06 of its total potential returns per unit of risk. Premier Foods PLC is currently generating about 0.12 per unit of volatility. If you would invest 13,062 in Premier Foods PLC on September 14, 2024 and sell it today you would earn a total of 5,838 from holding Premier Foods PLC or generate 44.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.0% |
| Values | Daily Returns |
Universal Health Services vs. Premier Foods PLC
Performance |
| Timeline |
| Universal Health Services |
| Premier Foods PLC |
Universal Health and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Health and Premier Foods
The main advantage of trading using opposite Universal Health and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Health position performs unexpectedly, Premier Foods can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Premier Foods will offset losses from the drop in Premier Foods' long position.| Universal Health vs. Lowland Investment Co | Universal Health vs. Power Metal Resources | Universal Health vs. Schroders Investment Trusts | Universal Health vs. Future Metals NL |
| Premier Foods vs. Samsung Electronics Co | Premier Foods vs. Samsung Electronics Co | Premier Foods vs. Hyundai Motor | Premier Foods vs. Toyota Motor Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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